Supreme Court Gifts Employers with Big Arbitration Win

On May 21, 2018, the U.S. Supreme Court handed down a huge win to employers in its much-anticipated decision in Epic Systems Corp. v. Lewis. Writing for a five-person majority, Justice Gorsuch upheld the validity of agreements that require employees to arbitrate claims against their employer or an individual—as opposed to a class or collective—basis. The court had been called to determine whether such class/collective waivers violate an employee’s right to engage in “concerted activities” as provided in the National Labor Relations Act (NLRA). Federal courts had been at odds on this issue, and the Supreme Court consolidated three cases to resolve the disagreement.

Ruling for employers, the court held class/collective actions do not constitute “concerted activities” under the NLRA. Next, relying heavily on AT&T v. Concepcion, it ruled that class/collective proceedings are anathema to the fundamental features of arbitration, including its informality and speed. For this reason, said the court, requiring that class/collective arbitrations be available disfavors arbitration generally, an outcome that expressly contradicts the Federal Arbitration Act (“FAA”). Finally, the court also held that the NLRA does not constitute a clear congressional command that the scope of the FAA should be reduced.

“The 5-4 majority with a strong textualist opinion from Justice Gorsuch, who took care to dismantle most of plaintiffs’ arguments, demonstrates the direction this Supreme Court is likely to take in future employment cases, says Pablo Orozco, labor and employment attorney at Nilan Johnson Lewis.” Fellow labor and employment attorney Jason Hungerford further explains, “Having an enforceable class/collective waiver within an arbitration agreement provides even more protection by ensuring that a single disgruntled former employee cannot turn an individual claim into an expensive and burdensome class or collective lawsuit.” Both lawyers advise employers to still take care in implementing arbitration agreements to ensure enforceability under generally applicable contract principles. For insights regarding the Supreme Court ruling and arbitration agreements, contact Pablo Orozco at porozco@nilanjohnson.com or 612.305.7729, or Jason Hungerford at jhungerford@nilanjohnson.com or 612.305.7741.